4 Habits That Build Your Credit Score

Your credit score can impact your life in a variety of ways. Most obviously, it helps determine the rates you get on loans and credit cards – but potential employers or landlords may also reference it to gauge an applicant’s overall financial reliability.

To put it simply, your credit score predicts how likely you are to repay your debts on time. If your credit score is lower than you want, to raise it you basically need to prove that you have good financial practices.

A better credit score is possible for everyone, but there is no quick fix. No matter what, improving your score simply takes time.

Ready to get started? Here are some habits that can help you raise your credit score over time!

Habit #1: Pay on Time

Your payment history is one of the most important factors that go into your credit score – which means making on-time minimum payments for all your current debts and recurring bills is one of the most important habits to pick up. And if you’re frequently missing payment due dates, it is crucial to figure out why.

Do you lose track of time because of your busy life or find it hard to juggle multiple due dates? Autopay can help you stay on top of things. Make a list of all your debts and recurring bills and log in to your accounts with the associated companies or organizations. From there, you should be able to set up monthly payments on the day of your choosing.

Do you struggle to allocate money for your debts at the end of the month? Try setting a payment date for right after your paycheck hits. That way, you’re not tempted to spend the money before you really need it, and you have an accurate idea of how much money is left in the monthly budget.

Habit #2: Focus on Debt

The other most important factor that goes into your credit score is the total amount of debt you owe and how much of your available credit you are using. As such, your next focus after making sure your payments are on time is paying down your debt. There are two popular methods you can try:

The snowball method means you start with the debt with the smallest balance and put extra money toward that each month. Once that debt is paid off, you roll that debt’s minimum payment into the next smallest balance’s monthly payment, and so on. This method keeps you motivated with early victories.

The avalanche method starts you on the debt with the highest interest rate. Once you’ve paid off that debt, you continue working your way through the next-highest interest rate, and so on. This method saves you interest, netting you more money in the long run.

Habit #3: Use What You’ve Got

Store credit cards and new card promotions can have appealing benefits and bonuses, but if you’re trying to raise your score, opening a new card could do more harm than good. New applications result in a hard inquiry on your credit history, which may decrease your score.

Be sure not to close any old credit cards either (unless they have an annual fee you want to ditch). The length of your credit history affects your score– when you close old cards, you’re shortening your credit history and possibly lowering your score. It’s also a good idea to make at least a small purchase on all your cards every few months—otherwise the card issuer may close the account due to inactivity.

Habit #4: Treat Your Credit Card Like a Debit Card

Especially if you’re just starting out, it’s in your best interest (no pun intended) to not carry a balance from month to month on your credit card. And the best way to manage that? By changing your thinking around your credit card habits.

The most responsible way to use a credit card is to never spend more than you can afford to pay in full that month. If you need help getting into the habit, try paying off your credit card purchases right after you make them.

By keeping your balance at zero from month to month, it shows lenders that you are reliable and less of a risk. Credit cards also often have the highest interest rates compared to other forms of debt, so this habit also helps prevent your credit card debt from spiraling out of control.

If you can manage to keep all four of these habits going, then in time you’ll likely see an improvement to your credit score. And remember – you’re not in this alone. If you need more personalized solutions and support to help you manage your debts, we’re here for you.